It Could Have Been Avoided

Environmental organization REDES-Friends of the Earth Uruguay publicly questioned the pro-corporate bias of the investment arbitration system in general and of the International Centre for Settlement of Disputes (ICSID), a World Bank agency, in particular.

REDES’s declaration also questions the Uruguayan government’s strategy in the case against US tobacco corporation Philip Morris before the investment dispute settlement body.

On July 3rd, ICSID decided it has jurisdiction to hear Philip Morris’s claim against Uruguay.

The first Frente Amplio administration (2005-2009) under oncologist Tabare Vazquez implemented several health policies aimed at reducing tobacco use. The measures included banning tobacco corporations from selling the same brand of cigarettes under different presentations and it forced them to include warnings about the health risks involved by smoking in 80% of both sides of cigarette packets.

Philip Morris argued that the Uruguayan government’s policies damaged its interests and violated intellectual property rights. In the company’s opinion, the government indirectly expropriated its investment without paying a compensation, which led to its filing a lawsuit before ICSID against the Uruguayan state in 2010, on the basis of a Bilateral Investment Treaty (BIT) signed between Uruguay and Switzerland, where the company is based.

ICSID’s decision “clearly constitutes a defeat for Uruguay, a threat for the health of our population and a huge victory for the transnational company”, says REDES-Friends of the Earth Uruguay on Wednesday’s statement.

The ICSID disregarded a bilateral investment treaty between Switzerland and Uruguay, because its article 2 provides that public health measures cannot be challenged by investors as an indirect expropriation of their investments.

REDES-FoE claims the Uruguayan government, which was represented by US law firm Foley&Hoag, should not have trusted the impartiality of the arbitration tribunals managed by the World Bank, and that they should have paid more attention to the criticism against ICSID, not only by the international civil society but also by progressive governments of the region such as Bolivia, Ecuador and Venezuela, which in the past years have decided not to be bound by the ICSID arbitration tribunals.

Silence and other rumors

The Uruguayan environmental organization especially criticizes the “strategy of silence” of the national government. “We consider that the official strategy through which information on the case was hidden was one of the decisive elements of this defeat”. REDES-FoE requested information several times unsuccessfully. “If we had had this information, we could have organized an international campaign to express civil society’s support, and we could have submitted an amicus curiae”.

The document published today also underlines that the Uruguayan government did not take advantage of the empathy of the global public opinion and of many governments with reference to our legislation against tobacco and its defense of sovereign rules, and of the solidarity and explicit support shown by governments at the 3rd Conference of the Parties (COP) to the FCTC held in Punta del Este, Uruguay, in November 2010, soon after Philip Morris filed its lawsuit against the country.

The Uruguayan delegation at the 4th FCTC COP held in Seoul, Korea, in November 2012, chose to remain silent. “At that moment the government should have clearly started to request international solidarity and support by other affected countries and the FCTC in its entirety against Philip Morris’ lawsuit”, says REDES-AT.

The social organization adds that the Uruguayan Pro-Secretary of the Presidency is right when he says that “experts (in this case Foley & Hoag law firm) will not want to miss a test case such as this one”, as cited by EFE news agency. REDES-FoE explains: “All those law firms profit from this new industry represented by investment and international companies’ claims against States, in which clearly they are a stakeholder and a key factor of their proliferation. The ‘experts’ take turns working as lawyers representing investors and transnational companies; as defense lawyers of the governments and also as court arbitrators”.

Meanwhile, Philip Morris has just lost similar lawsuits against Australia and Norway in the respective national courts of those countries, but this resolution paves the way for the tribunal to review and challenge the tobacco control policies implemented under Vazquez’s administration.

REDES-FoE calls the Uruguayan government to resume the initial course of action set by the inter-ministerial team, to seek the support of international civil society campaigns and “strengthen alliances with Latin American governments that are starting to question the legitimacy of arbitration tribunals to decide controversies where health policies and others of public interest adopted in a democratic and sovereign way are at stake”.

“In addition, Uruguay will now have at least to review its BITs, starting with the one signed with Switzerland, as stated by REDES-FoE Uruguay and Alliance Sud, the most important coalition of Swiss NGOs that work for the development and rights of the peoples of the global South aiming to exclude international arbitration as a mechanism to solve controversies and the concept of indirect expropriation which Philip Morris uses as a basis for its claim”.